Profit Taking Zaps Smaller Stocks : Market Overview

The NASDAQ market suffered its biggest one-day decline since last September, as growing uncertainty over the Clinton Administration’s economic plan sparked widespread profit taking. Blue chips were off only slightly.

* Bond yields eased after Federal Reserve Chairman Greenspan hinted that the Fed could cut rates again, depending on the Administration’s deficit-reduction program. Also, an auction of five-year Treasury notes saw better than expected demand.

Stocks

The market’s long, steady climb since mid-October suddenly gave way to a rash of selling, as short-term traders rushed to bail out.

The NASDAQ composite index tumbled 9.26 points, or 1.3%, to 697.90, its biggest one-day percentage decline since it dropped 1.5% last Sept. 25.

The blue chip Dow industrials, though off about 20 points at their afternoon lows, closed with a 7.56-point loss at 3,291.39.

Traders said there was no particular trigger for the NASDAQ selloff, except that the market’s four-month surge made it ripe for a fast decline. “Everybody just had the same idea at the same time--to sell,” said one trader at Hambrecht & Quist in San Francisco.

Marshall Acuff, portfolio strategist at Smith Barney, suggested that “people’s confidence in (President) Clinton is beginning to slip a bit. People are getting jittery and nervous about what’s going to be done” about the economy.

In the NASDAQ, losers swamped winners 1,319 to 781, compared to 1,175 to 707 on the New York Stock Exchange. Volume on the Big Board eased to 277.50 million shares from 314.11 million Tuesday.

The market failed to take strength from Fed Chairman Greenspan’s testimony before Congress. He said that although the economy was “not out of the woods,” business activity has been “increasing at a firmer pace.”

Among the market highlights:

* Technology stocks, the stars of the NASDAQ rally since fall, were the biggest losers. Intel lost 1 3/4 to 112 5/8, Microsoft dropped 1 3/4 to 86 1/4, Dell Computer slumped 1 5/8 to 47 3/4, and Oracle slid 1 7/8 to 33 1/4.

El Monte-based electronics distributor Marshall Industries plunged 3 7/8 to 35 5/8 after projecting lower quarterly earnings.

* In biotech, Synergen lost 1 to 55 3/4 after trading as low as 53. The company said a hoaxster had called a medical-investment newsletter with false, negative information about final trial results of Synergen’s key new drug, Antril.

* In trading typical of many smaller NASDAQ issues, Pacific Physicians, a Redlands-based health care management firm, plunged 4 1/2 to 20, even though there was no news about the firm. The company said it could only assume the drop was profit taking.

* Among bigger issues, sellers targeted Circus Circus, which fell 3 to 53 5/8; Nike, off 1 3/4 to 80 7/8, and Merrill Lynch, down 2 to 67 1/4.

*Duracell tumbled 1 3/8 to 33 1/8, while SLM Intl. gained 1 1/4 to 24 3/4. SLM said it has created a recharger for alkaline batteries. Duracell said recharging is “unsafe.”

* On the plus side, some bank stocks gained on hopes for still-lower interest rates. Chemical Banking jumped 1 1/2 to 41 3/4, Citicorp added 3/4 to 26 3/8, and Wells Fargo was up 7/8 to 99 5/8.

Overseas, Frankfurt’s DAX average finished at 1,562.32, off 13.84 points, while London’s Financial Times 100-share index slipped 3.2 points to 2,832.5.

In Tokyo, the Nikkei average added 17.05 points to 16,509.68.

In Mexico City, the Bolsa index lost 38.61 points, or 2.2%, to 1,740.69 amid foreign selling.

Credit

Buyers returned to bonds after Tuesday’s selloff, as Fed Chairman Greenspan said the Fed will maintain an anti-inflationary monetary policy, but one that supports “an extension of the recent more hopeful signs of solid growth.”

Many traders took that as a hint that the Fed could ease credit again, especially if it sees real progress in the Clinton Administration’s attempt to cut the federal budget deficit.

The yield on the 30-year Treasury bond slipped to 7.24% from Tuesday’s 7.25%. Shorter-term rates declined more substantially.

It helped that the Treasury’s auction of $11.5 billion in five-year notes was well-received, after a poor showing for two-year maturities at an auction Tuesday. The median yield on the five-year notes was 5.63%.

Other Markets

The dollar rose in listless trading. The gains were most pronounced against the British pound, one day after Britain cut interest rates to 15-year lows.

At the close in New York, it took $1.511 to buy one pound, down from Tuesday’s $1.538.

The dollar also rose to 124.10 Japanese yen, up from 123.55 on Tuesday, and to 1.587 German marks, up from 1.577.

Meanwhile, oil edged higher on the New York Merc. Near-term crude gained 2 cents to $19.66 a barrel. On the Comex, near-term gold lost $1.20 to $329.90 an ounce. Silver fell 2 cents to $3.68.

Market Roundup, D6